Co-Opetition - Adam M. Brandenburger [11]
The phone companies proved to be a natural ally. ProShare complements their business because it receives and transmits more data than ordinary phone lines can handle. To work effectively, ProShare requires an Integrated Services Digital Network (ISDN) line.7 These lines have three channels for transmission—two for data and one for voice—each with nearly five times the capability of ordinary twisted copper. The phone companies have the capability of supplying ISDN lines, but there’s been little demand so far. If people buy ProShare, they’ll buy ISDN lines, too.
So Intel doesn’t have to pay for ProShare all by itself. Just as phone companies subsidize the purchase of a new cellular phone in order to attract new subscribers, some are subsidizing ProShare to encourage people to buy ISDN lines. They are offering ProShare to their customers for $999, half the list price of $1,999.8
In another move to create momentum for ProShare, Intel reached an agreement with Compaq under which Compaq will include ProShare in its business PCs. This integration brings down the cost of ProShare for Compaq buyers to between $700 and $800 and gives ProShare’s market presence a further boost.
All the players—Intel, phone companies, and Compaq—recognize their complementary relationship. Intel wants to increase the demand for processing capability; phone companies want to increase the demand for data transmission; Compaq wants its business PCs to stand out from the competition. These objectives all come together with personal videoconferencing.
2. The Value Net
We’re now in a position to better answer our first question: if business is a game, who are the players and what are their roles? Customers, suppliers, and competitors. And one more category: people who provide complements. There’s no word for people who provide complements, so we’re going to propose one: complementor. This is the natural counterpart to the term “competitor.” The fact that we had to coin a new word is proof that the vital role of complements has been largely overlooked in business strategy.
Why not just call complementors “partners” or “allies”? There are two reasons. First, the terms “partner” and “ally” are too broad. Customers, suppliers, and complementors can all be your partners or allies. We want to distinguish these roles. Second, the terms “partner” and “ally” are, in a different way, too narrow. They don’t necessarily capture the full nature of the business relationship—a relationship that involves some inherent tensions, as we’ll see.
In the rest of this chapter, we’re going to present a complete picture of the game of business. We’ll explore the roles of all four types of players—customers, suppliers, competitors, and complementors—and the interdependencies among them. We’ll see how the same player can have multiple roles. We’ll define exactly what we mean by our new term “complementor”; it will even prove useful to give a definition of the familiar term “competitor.”
It’s a back-to-basics exercise. Focusing on one type of player or one type of relationship tends to produce blind spots. Taking in the wider picture reveals many new strategic opportunities.
To get things started, we introduce a schematic map to help you visualize the whole game. This map, the Value Net, represents all the players and the interdependencies among them. As we proceed, you might start thinking about how you’d draw a Value Net for your business. You’ll see the Value Net we drew for our own business later on in this chapter.
THE VALUE NET
Along the vertical dimension of the Value Net are the company’s customers and suppliers. Resources such as raw materials and labor flow from the suppliers to the company, and products and services flow from the company to its customers.9 Money flows in the reverse direction, from customers to the company and from the company to suppliers.
Along the horizontal dimension are the company’s competitors and complementors. We’ve already seen many examples of complementors. Here’s a definition